Do Middle Classes Bring Institutional Reforms?

15 Pages Posted: 20 Apr 2016

See all articles by Norman Loayza

Norman Loayza

World Bank - Research Department

Jamele Rigolini

New York University (NYU) - Department of Economics

Gonzalo Llorente

affiliation not provided to SSRN

Multiple version iconThere are 2 versions of this paper

Date Written: March 1, 2012

Abstract

The paper examines the link between poverty, the middle class and institutional outcomes using a new cross-country panel dataset on the distribution of income and expenditure. It uses an econometric methodology to gauge whether a larger middle class has a causal effect on policy and institutional outcomes in three areas: social policy in health and education, market-oriented economic structure and quality of governance. The analysis find that when the middle class becomes larger (measured as the proportion of people earning more than US$10 a day), social policy on health and education becomes more progressive, and the quality of governance (democratic participation and official corruption) also improves. This trend does not occur at the expense of economic freedom, as a larger middle class also leads to more market-oriented economic policy on trade and finance. These beneficial effects of a larger middle class appear to be more robust than the impact of lower poverty, lower inequality or higher gross domestic product per capita. That may be linked to the evolution of the middle class: they are more enlightened, more likely to take political actions and have a stronger voice. They also share preferences and values for policy and institutional reforms, as well as higher stakes in property rights and wealth accumulation.

Keywords: Inequality, Governance Indicators, Economic Theory & Research, Poverty Impact Evaluation, Achieving Shared Growth

Suggested Citation

Loayza, Norman and Rigolini, Jamele and Llorente, Gonzalo, Do Middle Classes Bring Institutional Reforms? (March 1, 2012). World Bank Policy Research Working Paper No. 6015. Available at SSRN: https://ssrn.com/abstract=2029439

Norman Loayza (Contact Author)

World Bank - Research Department ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Jamele Rigolini

New York University (NYU) - Department of Economics ( email )

269 Mercer Street, 7th Floor
New York, NY 10011
United States

Gonzalo Llorente

affiliation not provided to SSRN

No Address Available

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